French iTunes Law Could Help Record Labels Break $1/Song Pricing

from the shifting-power dept

After plenty of changes, it looks like France has approved a new law to get Apple to open up iTunes, by requiring it to share technical information, under certain conditions (which turn out to be quite important). If you recall, in the original version, it would have forced anyone selling music to open up the content so it could be played on any device. Rather than using that as an opportunity to experiment with DRM-free music, Apple instead announced that it would probably leave the French market. This resulted in a series of negotiations and changes so that the new bill doesn't require full openness. It only requires that anyone selling copy-protected music give technical info to competitors who request it to make sure that songs from one service can play on other devices -- with one major exception. If the restrictions are part of the contract the music store has with the record labels, then they do not need to open them up. In other words, expect Apple to renegotiate its contracts (if they don't already have this) to make sure that its FairPlay copy protection is a part of the contract.

However, this does bring up one interesting possibility. It hands some power back to the record labels if the renegotiation is necessary. The record labels should (but probably don't) recognize that forcing Apple to open up actually helps them -- because it takes away Apple's power position in the market. Thus, if they refuse to renegotiate the contract and force Apple to open up (if it stays in France) it could give them their first opening to breaking down Apple's dominant position. Alternatively, the record labels could use this as a negotiating ploy to finally get Steve Jobs to back down on the $1/song price that he demands, and which the labels have wanted to ditch for years. Either way, it seems like this law could give some power back to the record labels -- which seems like the opposite of its original intention to give more power to users.

Good analysis. One problem though - the labels would have to accept DRM-less music to do it. So if I'm Jobs, and they come to me and say "we think music should be DRM-free. Oh, by the way, change your pricing scheme," I laugh at them. He'd have to know right away that it's a bluff, and a bad one.

I mean, which one's worse to the RIAA; flat pricing scheme or unprotected content? I don't see this one happening.

It is probably already a term of the contract that Apple is only allowed to sell the songs for use on the iPod. The record companies would not have agreed to give Apple a general licence to republish their material.

If the record companies wanted to sell into the French market music without copy protection for a price over a dollar per song they are of course free to do so on their own at any time.

So let iTunes pull out of France. Like anyone really cares. Apple loses a market, The RIAA and the major labels lose a market. As artist dissatisfaction grows among the major lables this will just be another nudge toward jumping ship to Networkk or independant lables. The internet has proven time and again that neither the artists nor the consumers need Sony or any of the other major labels. These labels and the RIAA are just a drain that suck money out of both the artists and consumers pockets.

I'm not buying it...

At the risk of offending the French, France isn't a big enough market for Apple to consider renegotating its deals with the labels. It might be a different story if it were the entire EU.

I agree that Apple's negotiating power with the labels is directly related to its share of the DAP market. It's not an entrenched position - there's certainly nothing technical in the Apple offering that can't be duplicated, which leaves only the brand itself. As long as Apple is seen as "fighting for the little guy" against the labels, it will continue to enjoy a favorable brand position, something that Sony can never hope to duplicate, being one of the "bad guys" at the labels.

Terrible analysis

The analysis presumes that *Apple* mandates or prefers the DRM.

iTunes and all iPods have absolutely no problem with non-DRM content. And Apple's position is hardly assailed by non-DRM content's availability. The RIAA and similar labels' representative bodies are *strongly* opposed to non-protected content and would be hard-pressed to agree to any release of their captive artists' content in an unprotected form. They've even spent the last few years experimenting with ways to prevent the consumer from even accessing the content on CD without protection.

Apple need not worry that the music industry will consider the French law as an arrow in their quiver. And you can bet that none will renegotiate with non-DRM as an option on the bargaining table. That option will be in the dustbin before the players even sit at said table.

Re: Terrible analysis

Apple has made it clear that they now do very much support DRM, in part because it gives them tremendous lock-in.

And you can bet that none will renegotiate with non-DRM as an option on the bargaining table.

You misunderstand what I'm saying. The labels don't have to negotiate for non-DRM, but all they need to do is make sure that DRM is not in the contract. Apple can still sell the songs however it wants -- but would then be forced to tell other providers how to interoperate. That opens up the market, even with DRM still enabled.

Re:

One problem though - the labels would have to accept DRM-less music to do it.

Not so. As long as the contract isn't specific, there can still be DRM. The only thing is that Apple would have to reveal how Fairplay worked to other providers so there could be compatibility. It doesn't mean *no* DRM, it's just how specific the contract is.

$1 a song

Why do the RIAA people want to raise the cost of the songs? Go out to a store and get a 20 song CD for $15 or go onto I tunes and get the same 20 songs for $20. And they don't think that’s enough money yet? I think its too much.

People Have Short and Addled Memories

It's a little annoying to read spots like: "expect Apple to renegotiate its contracts (if they don't already have this) to make sure that its FairPlay copy protection is a part of the contract". HELLO... are you paying ANY attention? Apple didn't want DRM to start with, the record companies required that it be a part of the system, and that's that. People keep looking at the business and thinking Apple is purely trying to sell music. It's kinda like the record is stuck and I need to slap the side!

Apple is trying to sell iPODS. Now.. DRM has certainly helped Apple to retain customers who might bristle at transferring their songs... but that's a result of the contracts Apple had to negotiate. Likewise, people using Microsoft's DRM and looking to switch to a player that doesn't support Microsoft's system... are also screwed. Does it mean the music industry will come back to Microsoft and say... Won't you please make our music DRM free? We'd really like that... Come now.

If the music industry said, "Hey, we don't want DRM." Apple would be saying, GREAT! Groovy! We'll focus on making cooler iPods with features that aren't restricted by DRM. As it stands, the RIAA thinks that most of the music on iPods are pirated. How much more so woud it be the case, if Apple didn't have to monitor "rights", could allow iPods to connect to ANY iTunes installation and "download" someone's collection regardless of whether the music were purchased online, and if Apple could simply allow every feature in iTunes to branch out... like "two way music syncing", "Internet-wide" stream-sharing with fully-integrated WebDJ-like full-song playlists... If Apple could get away with it, it would do whatever would make its products more popular. Trapping people into a restrictive usage contract isn't where its business interests lie. Maintaining its end of its contracts clearly is.

Please keep the story straight, so people don't get misinformed. The whole "C.R.A.P." thing is silly, considering no one requires anyone to put DRM on an iPod or to use DRM in iTunes. If you never go to the iTMS, you'll never need to know anything about it.

Re: Re:

"Not so. As long as the contract isn't specific, there can still be DRM. The only thing is that Apple would have to reveal how Fairplay worked to other providers so there could be compatibility. It doesn't mean *no* DRM, it's just how specific the contract is."

Yes, but we're talking negotiation here - that's the premise, right? So a record exec comes to Apple with some nefarious scheme to get non-flat pricing by dropping the DRM requirement. Whatever Apple actually wants, what they say is "Great idea! We've been wanting to sell unDRM-ed music for years!" Then the record exec tucks his tail back between his legs and walks away, because he can't risk calling that bluff.

Put another way - there's *no way* the record companies do a deal with Apple that doesn't feature DRM specifically outlined in the contract. Otherwise, Apple could start selling DRM-less music at any time, for any reason, most specifically including bargaining leverage. Once the contract is in place, Apple could start selling unprotected content to get any concession they want from the RIAA. The RIAA is just too paranoid about pirating to allow it. And that means that Apple still owns them.